AP MACROECONOMICS: UNIT 5 LONG-RUN CONSEQUENCES OF STABILIZATION POLICIES

Philips Curve

A model illustrating the inverse relationship between inflation and unemployment in the short run and a natural rate of unemployment independent of inflation in the long run.

Quantity Theory of Money

The idea that the amount of money exchanged in the economy is equal to the nominal value of the economy's output; expressed as the formula MV=PQ

Budget

A plan for tracking income and expenses.

Receipts

Government revenue, funds collected mostly from income taxes, payroll taxes, and corporate profit taxes.

Outlays

Government spending/expenditures, payments made for various obligations such as transfer payments and interest payments on the national debt.

Deficit Spending

Government spending above its revenue by borrowing the excess funds.

National Debt

The sum of federal budget deficits and surpluses over time.

Crowding Out

The macroeconomic phenomenon in which government deficit spending increases interest rates and negatively impacts business investment and/or household consumption.

Aggregate Production Function

A model illustrating the positive (direct) relationship between the physical capital per worker and the real GDP per worker.

Capital Stock/Accumulation

Building this up increases economic growth.

Supply-Side Fiscal Policy

Government actions intended to boost business investment and productivity to encourage long-run economic growth.

Infrastructure

The physical structures and systems needed to operate an economy; this includes resources like a power grid, highway system, and commercial buildings.

Eminent Domain

Government seizure of private property for the public good.

Privatization

The process of transferring the control of a business or industry from government/public to private ownership.

Deregulation

The relaxation or elimination of rules and requirements for business operations.